Information from the Washington State Department of Financial Institutions

Retirement Savings Accounts

IRAs, pensions, 401(k) plans, and annuities are all accounts that can be used to help save for retirement. Here's how they work.

Individual Retirement Accounts (IRAs)

IRAs are retirement accounts that offer tax advantages.  An IRA can be set up through a financial institution, insurance company, mutual fund or stockbroker. The most common types of IRAs are the traditional and Roth.

Both plans can invest in stocks, bond, mutual funds and other assets and allow penalty-free withdrawals after age 59 ½. The difference between the two is how they’re taxed.

  • Traditional IRA: The tax advantage of a traditional IRA is that your contributions are tax-deductible in the year are made. You will, however, pay taxes when you withdraw.

  • Roth IRA: Contributions are made on an after-tax basis. When you withdraw in retirement, you will not be taxed. 

Pension Plans

A pension is a retirement plan that you put money into from current wages. Your employer may also match a portion of the your annual contributions, up to a specific percentage or dollar amount.

The money you put is then invested on your behalf. The earnings that the investments generate can than be withdrawn upon retirement.

401(k) Plans

A 401(k) is a retirement savings plan sponsored by an employer. 401(k) plans let workers save and invest a piece of their paycheck before taxes are taken out. Many employers match, up to a certain percentage, what you contribute. Taxes aren’t paid until the money is withdrawn from the account.

With a 401(k), you control how your money is invested. Employers usually hire a plan administrator, and they'll send you information about your plan and its performance.

Retirement Plans for Self-Employed People

Many of the same options to save for retirement on a tax-deferred basis are available to those self employed. The IRS website has good information about Retirement Plans for Self-Employed People.


Annuities are a type of insurance product that pays you income. Some people use annuities as part of a retirement strategy. Learn more about how annuities work.

Washington Retirement Marketplace

Sadly, many small businesses and workers don't have access to retirement plans because of their cost and complexity. The Washington Retirement Marketplace makes it easy to find a plan so you can start saving for the retirement you deserve. Learn about saving for retirement and compare plans at the Marketplace.

What Are Lump-Sum Payouts?

Increasingly, employers are making available to their employees a one-time payment for all or a portion of their pension. This is known as a lump-sum payout option.

If you choose a lump-sum payout instead of monthly payments, the responsibility for managing the money shifts from your employer to you. In addition, you increase the risk of outliving your money, and losing your money due to bad investment advice, fraud, or poor stock market performance.

For more information about lump-sum payouts, we recommend you view the Consumer Financial Protection Bureau's Guide to Lump-Sum Payouts.